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Will the last investor on the NSE please put out the lights?

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By Dele Sobowale

Banks market capitalisation drops by N657bn —August 12, 2019.

Investors lose N157.7bn as 43 stocks decline —August 13, 2019.

WHEN in 2016 the forecast of a continuous decline in stock prices was made, a friend asked me when it will end and a recovery gets underway. The answers provided were simple. The bad news for investors, whether in the capital market or elsewhere, will continue as long as Nigeria has a Federal Government whose leaders don’t understand how modern economies work.


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The unceasing competition among nations of the world for advantage will always work in favour of countries blessed with leaders with a great deal of know-how. Nigeria, unfortunately, is stuck with economic illiterates managing our fortunes for us. Furthermore every quarter that produces poor results will see us fall farther behind other nations and also make it more difficult to catch up.

A deregulated capital market such as ours presents government and the governed an objective report card of what global investors think of our performance. No senior special adviser on media or minister of mis-information can claim that we are doing very well on the economy when the trend remains downwards for almost 27 months. The reasons are not too difficult to understand for those not wedded to government propaganda.

Capital is a coward; it takes flight at the first serious sign of trouble. The first serious sign of trouble came in 2016 when the economy went into a recession for the first time in 38 years. The results were made available in the first quarter, Q1, of 2017. Investors expected a vigorous response from the Federal Government towards strong and quick recovery. What followed was not reassuring and induced pessimism about the Federal Government’s ability to understand and manage a complex economy.

To begin with the president had prolonged health challenges – which led to a lot of ugly speculations about the captain of the Nigerian ship of state. The vice president stepped in and filled some of the political vacuum created; but he failed to take any significant measures to accelerate economic growth.

Meanwhile, the 2017 budget was hostage to divisive politics. The leaders of the executive and legislative branches of government forgot (or never realised) that bad politics will drive out good money from any economy any time. Collectively, they behaved as if Nigeria was isolated from the globalisation of all markets.

A friend in need is no friend of mine —American comedian.

The budget was eventually passed in late May and signed in early June. By then, the more jittery foreign portfolio investors had started to check out. They knew from experience about the verdict of history on such matters.

A budget passed so late in the year and, with no growth stimulus of any sort, invariably results in low Gross Domestic Product, GDP, growth. They were absolutely correct. The year 2017 ended with 0.8 per cent growth – barely noticeable. With -1.4 recorded in the previous year, the cumulative for 2016 and 2017 was still negative.

Given the depressing results for the first two years, many presidents invariably dissolve the cabinet and attempt to bring more experienced people into government to accelerate development. Nothing like that happened. Individuals appointed on account of loyalty or to pay political debts were retained until the end. The ministers of the most important ministries from the standpoint of the economy – power, works, transportation, finance, internal affairs – became national embarrassments to everybody who could objectively assess their performance. They embarrassed everybody except the team manager who either did not know what a performance appraisal is all about or did not seem to care. But, foreign investors with their funds locked up in the largest country in the dark continent were not so forgiving.

They noticed that the Lagos-Ibadan double-guage rail line which was promised before the end of 2017 was not anywhere near 20 per cent completion when the year ended. This is August 2019 and the line is still far from being opened for business. The Chinese, who provided the loan for the rail line know that there is a time component to any loan deal. With delay, interest payments mount. That was how we got into the debt trap in the 1980s. We are back on familiar road to our detriment.

They also noticed that we allowed the re-construction of the busiest road in Nigeria – Lagos-Sagamu-Ibadan – to drag on for ever. It has taken us all the years from Yar’Adua’s government in 2007 to repair and expand a road which Gowon’s administration delivered from virgin land in less than three years. It will still remain uncompleted by December this year.

The paralysis of the nation’s biggest ports for almost five years could only occur in a country which does not want foreign direct investment in large amounts.

The Apapa gridlock, which has not been duplicated anywhere in the world, is a classic case study in How Not To Run A Government. The situation not only slows down evacuation of imported materials from the ports, it actively discourages exports.

The impunity of the drivers of trucks and trailers is simply astonishing. Osinbajo, as acting President issued them an order to vacate in 72 hours. He was ignored; and the situation got worse.

Two months ago, the President issued the same “Quit Notice”. They are still there till today. No official of government has received a query for this slap in the face of the nation’s highest constituted authority. Yet, Nigeria loses billions each day the trucks stay there.

Foreign investors take note of all these signs of a nation in almost total disarray and they have rightly decided to withdraw to safer economies. Obviously, the government of any country which can tolerate the atrocities we mentioned above, as well as others left untouched, cannot possibly expect its economy to grow at six, seven or eight per cent as China, India and Indonesia – the countries mentioned on June 12 – had done for several years. Can anyone imagine China allowing truckers to block a major road for two weeks – not to talk of five years?

Those still involved in the Nigerian Stock Exchange must be there now for other reasons other than return on investment. The Nigerian economy is heading for another low growth year. The firms listed on the NSE are struggling. Now, the Food and Beverage sector will experience a tough time starting with those importing milk products as component of their manufacturing process.

The collateral damage which the change of government policy will have on non-food manufacturers (packaging materials, etc.) will be more profound than anybody can imagine at this time.

Decline in total capitalisation since January would have been alarming if not for new major listings like MTN. But, even with them, the future is bleak for investors. The Nigerian economy under current management cannot deliver the sort of robust growth which will halt the continuous slide in share prices.



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